UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20192020
or
¨ ☐ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 000-54817
DIGITAL LOCATIONS, INC. |
(Exact name of registrant as specified in its charter) |
Nevada |
| 20-5451302 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
3700 State Street, Suite 350, Santa Barbara, California 93105
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (805) 456-7000
Securities registered pursuant tounder Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share |
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Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x ☒No ¨o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x ☒No ¨o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
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Non-accelerated filer |
| Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ oNo x☒
Securities registered pursuant to Section 12(b) of the Act: None.
The number of shares of registrant’s common stock outstanding, as of November 14, 2019August 13, 2020 was 179,964,618.106,348,954.
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8 | ||||||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| 36 | |||||
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42 |
2 |
PART I – FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets | ||||||||
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|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
ASSETS |
| (Unaudited) |
|
|
|
| ||
|
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash |
| $ | 1,483 |
|
| $ | 19,232 |
|
Prepaid expenses |
|
| 11,231 |
|
|
| 2,000 |
|
Current assets from discontinued operations |
|
| - |
|
|
| 44,251 |
|
Total current assets |
|
| 12,714 |
|
|
| 65,483 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 757 |
|
|
| 1,117 |
|
Operating lease right to use |
|
| 10,469 |
|
|
| - |
|
Non-current assets from discontinued operations |
|
| - |
|
|
| 126,993 |
|
|
|
|
|
|
|
|
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Total assets |
| $ | 23,940 |
|
| $ | 193,593 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
|
|
|
|
|
|
|
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Accounts payable |
| $ | 132,021 |
|
| $ | 113,436 |
|
Accrued expenses and other current liabilities |
|
| 4,267 |
|
|
| 2,191 |
|
Accrued interest, notes payable |
|
| 516,318 |
|
|
| 342,752 |
|
Operating lease liability |
|
| 10,469 |
|
|
| - |
|
Derivative liabilities |
|
| 6,832,291 |
|
|
| 10,363,105 |
|
Convertible note payable, in default |
|
| 29,500 |
|
|
| 29,500 |
|
Convertible notes payable – related parties ($25,980 in default) |
|
| 58,600 |
|
|
| 58,600 |
|
Convertible notes payable, net of discount of $337,520 and $341,206, respectively |
|
| 2,256,129 |
|
|
| 1,836,964 |
|
Current liabilities from discontinued operations |
|
| - |
|
|
| 120,535 |
|
Total current liabilities |
|
| 9,839,595 |
|
|
| 12,867,083 |
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|
|
|
|
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Total liabilities |
|
| 9,839,595 |
|
|
| 12,867,083 |
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Stockholders’ deficit: |
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Preferred stock, $0.001 par value; 20,000,000 shares authorized: |
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Series B, 16,155 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively |
|
| 16 |
|
|
| 16 |
|
Series C, 36,000 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively |
|
| - |
|
|
| 36 |
|
Common stock, $0.001 par value; 2,000,000,000 shares authorized, 115,692,996 and 40,750,040 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively |
|
| 115,693 |
|
|
| 40,750 |
|
Additional paid-in capital |
|
| 26,013,554 |
|
|
| 25,492,975 |
|
Accumulated deficit |
|
| (35,944,918 | ) |
|
| (38,207,267 | ) |
Total stockholders’ deficit |
|
| (9,815,655 | ) |
|
| (12,673,490 | ) |
|
|
|
|
|
|
|
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Total liabilities and stockholders’ deficit |
| $ | 23,940 |
|
| $ | 193,593 |
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DIGITAL LOCATIONS, INC. | |||
|
| June 30, |
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| December 31, |
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|
| 2020 |
|
| 2019 |
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ASSETS |
| (Unaudited) |
|
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| |||
Current assets: |
|
|
|
|
|
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Cash |
| $ | 15,108 |
|
| $ | 8,275 |
|
Prepaid expenses |
|
| - |
|
|
| 2,808 |
|
Total current assets |
|
| 15,108 |
|
|
| 11,083 |
|
|
|
|
|
|
|
|
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Property and equipment, net |
|
| 271 |
|
|
| 595 |
|
Operating lease right to use |
|
| 1,975 |
|
|
| 7,708 |
|
|
|
|
|
|
|
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Total assets |
| $ | 17,354 |
|
| $ | 19,386 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
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|
|
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Current liabilities: |
|
|
|
|
|
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Accounts payable |
| $ | 214,463 |
|
| $ | 126,478 |
|
Accrued expenses and other current liabilities |
|
| 20,207 |
|
|
| 3,332 |
|
Accrued interest, notes payable |
|
| 704,229 |
|
|
| 581,610 |
|
Operating lease liability |
|
| 1,975 |
|
|
| 7,708 |
|
Derivative liabilities |
|
| 6,716,702 |
|
|
| 6,160,895 |
|
PPP loan payable |
|
| 9,501 |
|
|
| - |
|
Convertible note payable, in default |
|
| 29,500 |
|
|
| 29,500 |
|
Convertible notes payable – related parties ($25,980 in default) |
|
| 58,600 |
|
|
| 58,600 |
|
Convertible notes payable ($29,196 in default at June 30, 2020), net of discount of $88,947 and $258,518, respectively |
|
| 2,526,895 |
|
|
| 2,378,405 |
|
Total current liabilities |
|
| 10,282,072 |
|
|
| 9,346,528 |
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Total liabilities |
|
| 10,282,072 |
|
|
| 9,346,528 |
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Stockholders’ deficit: |
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Preferred stock, $0.001 par value; 20,000,000 shares authorized: |
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|
|
|
|
|
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Series B, 15,055 and 16,155 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively |
|
| 15 |
|
|
| 16 |
|
Series D, 0 and 1,000 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively |
|
| - |
|
|
| 1 |
|
Common stock, $0.001 par value; 2,000,000,000 shares authorized, 51,507,228 and 1,049,380 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively |
|
| 51,507 |
|
|
| 1,049 |
|
Additional paid-in capital |
|
| 26,296,745 |
|
|
| 25,937,634 |
|
Accumulated deficit |
|
| (36,612,985 | ) |
|
| (35,265,842 | ) |
Total stockholders’ deficit |
|
| (10,264,718 | ) |
|
| (9,327,142 | ) |
|
|
|
|
|
|
|
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Total liabilities and stockholders’ deficit |
| $ | 17,354 |
|
| $ | 19,386 |
|
See notes to condensed consolidated financial statements
3 |
Table of Contents |
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| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
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| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
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Revenues |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 91,153 |
|
|
| 98,055 |
|
|
| 287,580 |
|
|
| 475,446 |
|
Depreciation |
|
| (1 | ) |
|
| 337 |
|
|
| 359 |
|
|
| 1,011 |
|
Bad debt expense |
|
| 356,851 |
|
|
| - |
|
|
| 356,851 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 448,003 |
|
|
| 98,392 |
|
|
| 644,790 |
|
|
| 476,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (448,003 | ) |
|
| (98,392 | ) |
|
| (644,790 | ) |
|
| (476,457 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (246,490 | ) |
|
| (237,595 | ) |
|
| (727,290 | ) |
|
| (749,696 | ) |
Gain (loss) on change in derivative liabilities |
|
| 300,750 |
|
|
| (235,651 | ) |
|
| 3,904,122 |
|
| 2,029,272 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
| 54,260 |
|
|
| (473,246 | ) |
|
| 3,176,832 |
|
|
| 1,279,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
| (393,743 | ) |
|
| (571,638 | ) |
|
| 2,532,042 |
|
|
| 803,119 |
|
Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes |
|
| (393,743 | ) |
|
| (571,638 | ) |
|
| 2,532,042 |
|
|
| 803,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes |
|
| (64,315 | ) |
|
| - |
|
|
| (269,693 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (458,058 | ) |
| $ | (571,638 | ) |
| $ | 2,262,349 |
|
| $ | 803,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
| $ | 0.04 |
|
| $ | 0.02 |
|
Diluted |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
| $ | 0.00 |
|
| $ | 0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 90,951,343 |
|
|
| 38,776,436 |
|
|
| 61,204,791 |
|
|
| 38,776,436 |
|
Diluted |
|
| 90,951,343 |
|
|
| 38,776,436 |
|
|
| 3,700,131,456 |
|
|
| 38,776,436 |
|
DIGITAL LOCATIONS, INC.
Condensed Statements of Operations
(Unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
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| ||||
Revenues |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 79,292 |
|
|
| 84,408 |
|
|
| 172,586 |
|
|
| 196,428 |
|
Depreciation and amortization |
|
| 270 |
|
|
| 284 |
|
|
| 324 |
|
|
| 360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 79,562 |
|
|
| 94,692 |
|
|
| 172,910 |
|
|
| 196,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (79,562 | ) |
|
| (94,682 | ) |
|
| (172,910 | ) |
|
| (196,788 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (155,481 | ) |
|
| (258,950 | ) |
|
| (347,645 | ) |
|
| (480,800 | ) |
Gain (loss) on change in derivative liabilities |
|
| (736,625 | ) |
|
| 378,026 |
|
|
| (826,588 | ) |
|
| 3,603,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
| (892,106 | ) |
|
| 119,076 |
|
|
| (1,174,233 | ) |
|
| 3,122,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
| (971,668 | ) |
|
| 24,384 |
|
|
| (1,347,143 | ) |
|
| 2,925,784 |
|
Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations net of income taxes |
|
| (971,668 | ) |
|
| 24,384 |
|
|
| (1,347,143 | ) |
|
| 2,925,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes |
|
| - |
|
|
| (86,828 | ) |
|
| - |
|
|
| (205,377 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (971,668 | ) |
| $ | (62,444 | ) |
| $ | (1,347,143 | ) |
| $ | 2,720,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 17,641,667 |
|
|
| 225,668 |
|
|
| 11,378,418 |
|
|
| 204,820 |
|
Diluted |
|
| 17,641,667 |
|
|
| 15,332,130 |
|
|
| 11,378,418 |
|
|
| 15,311,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.06 | ) |
| $ | 0.11 |
|
| $ | (0.12 | ) |
| $ | 14.28 |
|
Diluted |
| $ | (0.06 | ) |
| $ | 0.00 |
|
| $ | (0.12 | ) |
| $ | 0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from discontinued operations per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | - |
|
| $ | (0.38 | ) |
| $ | - |
|
| $ | (1.00 | ) |
Diluted |
| $ | - |
|
| $ | (0.38 | ) |
| $ | - |
|
| $ | (1.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.06 | ) |
| $ | (0.28 | ) |
| $ | (0.12 | ) |
| $ | 13.28 |
|
Diluted |
| $ | (0.06 | ) |
| $ | (0.28 | ) |
| $ | (0.12 | ) |
| $ | 0.18 |
|
See notes to condensed consolidated financial statements
4 |
Table of Contents |
DIGITAL LOCATIONS, INC. AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders’ Deficit
NineSix Months Ended SeptemberJune 30, 20192020 (Unaudited)
|
| Series A Preferred Stock |
|
| Series B Preferred Stock |
|
| Series C Preferred Stock |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated |
|
|
|
| |||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance, December 31, 2018 |
|
| - |
|
| $ | - |
|
|
| 16,155 |
|
| $ | 16 |
|
|
| 36,000 |
|
| $ | 36 |
|
|
| 40,750,040 |
|
| $ | 40,750 |
|
| $ | 25,492,975 |
|
| $ | (38,207,267 | ) |
| $ | (12,673,490 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of notes payable and accrued interest payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 74,942,956 |
|
|
| 74,943 |
|
|
| 203,558 |
|
|
| - |
|
|
| 278,501 |
|
Return and cancellation of Series C preferred stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (36,000 | ) |
|
| (36 | ) |
|
| - |
|
|
| - |
|
|
| 36 |
|
|
| - |
|
|
| - |
|
Close out EllisLab Corp. equity accounts |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 316,985 |
|
|
| - |
|
|
| 316,985 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,262,349 |
|
|
| 2,262,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019 |
|
| - |
|
| $ | - |
|
|
| 16,155 |
|
| $ | 16 |
|
|
| - |
|
| $ | - |
|
|
| 115,692,996 |
|
| $ | 115,693 |
|
| $ | 26,013,554 |
|
| $ | (35,944,918 | ) |
| $ | (9,815,655 | ) |
|
| Series B |
|
| Series C |
|
| Series D |
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
|
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance, December 31, 2019 |
|
| 16,155 |
|
| $ | 16 |
|
|
| - |
|
| $ | - |
|
|
| 1,000 |
|
| $ | 1 |
|
|
| 1,049,380 |
|
| $ | 1,049 |
|
| $ | 25,937,634 |
|
| $ | (35,265,842 | ) |
| $ | (9,327,142 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of notes payable and accrued interest payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 40,677,465 |
|
|
| 40,677 |
|
|
| 57,343 |
|
|
| - |
|
|
| 98,020 |
|
Issuance of common stock for conversion of Series B preferred stock |
|
| (1,100 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9,777,778 |
|
|
| 9,778 |
|
|
| (9,777 | ) |
|
| - |
|
|
| - |
|
Reverse split rounding of shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,605 |
|
|
| 3 |
|
|
| (3 | ) |
|
| - |
|
|
| - |
|
Redemption of Series D preferred stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,000 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
Settlement of derivative liabilities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 311,547 |
|
|
| - |
|
|
| 311,547 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,347,143 | ) |
|
| (1,347,143 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020 |
|
| 15,055 |
|
| $ | 15 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 51,507,228 |
|
| $ | 51,507 |
|
| $ | 26,296,745 |
|
| $ | (36,612,985 | ) |
| $ | (10,264,718 | ) |
See notes to condensed consolidated financial statements
5 |
Table of Contents |
DIGITAL LOCATIONS, INC. AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders’ Deficit
NineSix Months Ended SeptemberJune 30, 20182019 (Unaudited)
|
| Series A Preferred Stock |
|
| Series B Preferred Stock |
|
| Series C Preferred Stock |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated |
|
|
|
| |||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance, December 31, 2017 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 16,155 |
|
| $ | 16 |
|
|
| - |
|
| $ | - |
|
|
| 38,776,436 |
|
| $ | 38,776 |
|
| $ | 20,537,950 |
|
| $ | (30,038,453 | ) |
| $ | (9,461,710 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeem Series A preferred shares |
|
| (1,000 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 803,119 |
|
|
| 803,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2018 |
|
| - |
|
| $ | - |
|
|
| 16,155 |
|
| $ | 16 |
|
|
| - |
|
| $ | - |
|
|
| 38,776,436 |
|
| $ | 38,776 |
|
| $ | 20,537,951 |
|
| $ | (29,235,334 | ) |
| $ | (8,658,591 | ) |
|
| Series B |
|
| Series C |
|
| Series D |
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
|
| ||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance, December 31, 2018 |
|
| 16,155 |
|
| $ | 16 |
|
|
| 36,000 |
|
| $ | 36 |
|
|
| - |
|
| $ | - |
|
|
| 181,111 |
|
| $ | 181 |
|
| $ | 25,533,544 |
|
| $ | (38,207,267 | ) |
| $ | (12,673,490 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of notes payable and accrued interest payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 145,365 |
|
|
| 145 |
|
|
| 76,294 |
|
|
| - |
|
|
| 76,439 |
|
Settlement of derivative liabilities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 82,632 |
|
|
| - |
|
|
| 82,632 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,720,407 |
|
|
| 2,782,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
|
| 16,155 |
|
| $ | 16 |
|
|
| 36,000 |
|
| $ | 36 |
|
|
| - |
|
| $ | - |
|
|
| 326,476 |
|
| $ | 326 |
|
| $ | 25,692,470 |
|
| $ | (35,486,860 | ) |
| $ | (9,794,012 | ) |
See notes to condensed consolidated financial statements
6 |
Table of Contents |
DIGITAL LOCATIONS, INC
Condensed Statements of Cash Flows
(Unaudited)
Condensed Consolidated Statements of Cash Flows | ||||||||
(Unaudited) | ||||||||
| ||||||||
|
| Nine Months Ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net income |
| $ | 2,262,349 |
|
| $ | 803,119 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 360 |
|
|
| 1,011 |
|
Amortization of debt discount to interest expense |
|
| 544,686 |
|
|
| 614,144 |
|
Gain on change in derivative liabilities |
|
| (3,904,122 | ) |
|
| (2,029,272 | ) |
Bad debt expense |
|
| 356,851 |
|
|
| - |
|
Common stock issued for fees |
|
| 250 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Increase in prepaid expenses |
|
| (9,231 | ) |
|
| (6,698 | ) |
Increase (decrease) in: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 18,585 |
|
|
| 3,990 |
|
Accrued expenses |
|
| 2,076 |
|
|
| 91 |
|
Accrued interest, notes payable |
|
| 182,604 |
|
|
| 135,552 |
|
Net change in assets of discontinued operations |
|
| 10,843 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities: |
|
| (534,749 | ) |
|
| (478,063 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from convertible notes payable |
|
| 517,000 |
|
|
| 480,500 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 517,000 |
|
|
| 480,500 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| (17,749 | ) |
|
| 2,437 |
|
Cash, beginning of period |
|
| 19,232 |
|
|
| 23,461 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
| $ | 1,483 |
|
| $ | 25,898 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
|
| Six Months Ended |
| |||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||
|
|
|
|
|
| |||||||||||
Cash flows from operating activities: |
|
|
|
|
| |||||||||||
Net income (loss) |
| $ | (1,347,143 | ) |
| $ | 2,720,407 |
| ||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
| |||||||||||
Depreciation and amortization |
| 324 |
| 361 |
| |||||||||||
Amortization of debt discount to interest expense |
| 216,337 |
| 362,766 |
| |||||||||||
(Gain) loss on change in derivative liabilities |
| 826,588 |
| (3,603,372 | ) | |||||||||||
Changes in assets and liabilities: |
|
|
|
|
| |||||||||||
(Increase) decrease in prepaid expenses |
| 2,808 |
| (17,653 | ) | |||||||||||
Increase (decrease) in: |
|
|
|
|
| |||||||||||
Accounts payable |
| 87,985 |
| 24,534 |
| |||||||||||
Accrued expenses |
| 19,125 |
| 2,076 |
| |||||||||||
Accrued interest, notes payable |
| 131,308 |
| 118,034 |
| |||||||||||
Change in net assets of discontinued operations |
|
| - |
|
|
| 16,378 |
| ||||||||
|
|
|
|
|
| |||||||||||
Net cash used in operating activities |
|
| (62,668 | ) |
|
| (376,469 | ) | ||||||||
|
|
|
|
|
| |||||||||||
Cash flows from investing activities |
|
| - |
|
|
| - |
| ||||||||
|
|
|
|
|
| |||||||||||
Cash flows from financing activities: |
|
|
|
|
| |||||||||||
Proceeds from convertible notes payable |
| 60,000 |
| 392,000 |
| |||||||||||
Proceeds from PPP loan |
|
| 9,501 |
|
|
| - |
| ||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by financing activities |
|
| 69,501 |
|
|
| 392,000 |
| ||||||||
|
|
|
|
|
| |||||||||||
Net increase in cash |
| 6,833 |
| 15,531 |
| |||||||||||
Cash, beginning of period |
|
| 8,275 |
|
|
| 19,232 |
| ||||||||
|
|
|
|
|
| |||||||||||
Cash, end of period |
| $ | 15,108 |
|
| $ | 34,763 |
| ||||||||
|
|
|
|
|
| |||||||||||
Supplemental Disclosure: |
|
|
|
|
| |||||||||||
Cash paid for income taxes |
| $ | - |
| $ | - |
| |||||||||
Cash paid for interest |
| - |
| 1,876 |
| |||||||||||
|
|
|
|
|
| |||||||||||
Non-cash financing and investing activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Debt discount for derivative liabilities |
| $ | 517,000 |
| $ | 480,500 |
|
| $ | 40,766 |
| $ | 392,000 |
| ||
Common shares issued in conversion of debt |
| $ | 278,501 |
| $ | - |
|
| 98,020 |
| 76,439 |
| ||||
Surrender and retirement of Series C preferred stock |
| $ | 36 |
| - |
| ||||||||||
Redemption of Series A preferred stock |
| $ | - |
| $ | 1 |
| |||||||||
Common shares issued in conversion of Series B preferred shares |
| 1 |
| - |
| |||||||||||
Reverse split rounding of shares |
| 3 |
| - |
| |||||||||||
Redemption of Series D preferred stock |
| 1 |
| - |
| |||||||||||
Settlement of derivative liabilities |
| 311,547 |
| 82,632 |
| |||||||||||
Increase in other assets and operating lease liability |
| $ | 18,352 |
| $ | - |
|
| - |
| 18,352 |
|
See notes to condensed consolidated financial statements
7 |
Table of Contents |
DIGITAL LOCATIONS, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
NineSix Months Ended SeptemberJune 30, 20192020
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Digital Locations, Inc. (the “Company”) was incorporated in the State of Nevada on August 25, 2006 as Zingerang, Inc. On April 2, 2007, the Company changed its name to Carbon Sciences, Inc. and on November 14, 2017, the Company changed its name to Digital Locations, Inc.
On November 30, 2018, the Company entered into an Agreement and Plan of Merger ( the “Merger”(the “Merger Agreement”) pursuant to which EllisLab, Inc., an S Corporation owned 100% by Rick Ellis, that builds software for web professionals and provides related support services, merged with and into EllisLab Corp., a newly-formednewly formed subsidiary of the Company.Company (the “Merger”). EllisLab, Inc. builds software for web professionals and provides related support servicesservices.
On September 30, 2019, the Company, entered into an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. (the “EllisLab Corp. Sale Agreement”) with Rick Ellis to sell to Rick Ellis all of the issued and outstanding shares of EllisLab Corp. for $10,000. In payment of$10,000 and the purchase price, Rick Ellis tendered and assigned to the Company 36,000 shares of the Company’s Series C preferred stock ownedacquired by him,Rick Ellis in the Merger, which represents all of the issued and outstanding shares of the Series C preferred stock. In connection with the EllisLab Corp. Sale Agreement, the Covenant Notcovenant not to Competecompete and the Lockuplockup of Stock Considerationstock consideration entered into in connection with the Merger were terminated and the parties’ obligations thereunder were released. Pursuant to the Ellis Lab Corp. Sale Agreement, the Company effectively divested itself of the Ellis Lab business and discontinued it.
Consequently, the revenues and expenses for EllisLab Corp. are reported as “Loss from discontinued operations, net of income taxes” in our condensed statements of operations for all period presented.the three months and six months ended June 30, 2019. The EllisLab Corp. assets and liabilities have been retroactively reclassified as assets and liabilities of discontinued operations. See Note 3. All significant intercompany accounts and transactions have been eliminated.
In November 2019, the Company announced its plan to focus its resources on developing a portfolio of cell tower sites to help meet the expected demand of rapidly growing 5G networks. The Company’s goal is to become a “landlord” of tomorrow’s wireless communications assets.
Effective February 14, 2020, the Company effected a reverse split of its common stock at a ratio of one for two hundred twenty-five shares (1:225) (the “Stock Split”) with the filing of a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada. The Company has given retroactive effect for the Stock Split in its financial statements and notes thereto for all periods presented.
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three months and ninesix months ended SeptemberJune 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020. For further information refer to the financial statements and notes thereto included in the Company’sCompany's Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on April 1, 2019.
8 |
Table of Contents |
Going Concern
The accompanying financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. As of SeptemberJune 30, 2019,2020, our current liabilities exceeded our current assets by $9,826,881$10,266,964 and we had a total stockholders’ deficit of $9,815,655.$10,264,718. In addition, subsequent to the agreement to sell EllisLab Corp. Sale Agreement which closed on September 30, 2019, the Company does not have any sources of revenues, and has reported negative cash flows from operations since inception. The Company currently does not have the cash resources to meet its operating commitments for the next twelve months and expects to have ongoing requirements for capital investment to implement its business plan. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern for a reasonable period of time.
The ability of the Company to continue as a going concern is dependent upon, among other things, raising additional capital. The Company has obtained operating funds primarily from the issuance of convertible debt. Management believes this funding will continue and will provide the additional cash needed to meet the Company’s obligations as they become due. There can be no assurance, however, that the Company will be successful in accomplishing its objectives. Without such additional capital we may be required to cease operations. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are disclosed in Note 2 to the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2019.14, 2020. The following summary of significant accounting policies of the Company is presented to assist in understanding the Company’s interim financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment and intangible assets, operating lease obligations, impairment of assets, the deferred tax valuation allowance, the fair value of stock options and derivative liabilities. Actual results could differ from those estimates.
Property and Equipment
The Company’s property and equipment is stated at cost, and is depreciated using the straight-line method over the estimated useful life of the related asset as follows:
Computer equipment | 3-5 years | |
Office furniture and equipment | 7 years |
9 |
Table of Contents |
Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.
The Company assesses the recoverability of property and equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management.
Derivative Liabilities
We have identified the conversion features of our convertible notes payable and Series B preferred stock and certain stock options and warrants as derivatives. Where the number of common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional options, warrants and convertible debt and equity are included in the value of the derivatives. We estimate the fair value of the derivatives using the Black-Scholes pricing model and a multinomial lattice model based on projections of various potential future outcomes. We estimate the fair value of the derivative liabilities at the inception of the financial instruments, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Fair Value of Financial Instruments
Disclosures about fair value of financial instruments, require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of SeptemberJune 30, 2019,2020 and December 31, 2018, the Company believes2019, we believe the amounts reported for cash, prepaid expenses, accounts payable, accrued expenses and other current liabilities, accrued interest - notes payable and convertible notes payable approximate fair value because of their short maturities.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASC”) Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| · | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
| · | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| · | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
10 |
Table of Contents |
We measure certain financial instruments at fair value on a recurring basis. Liabilities measured at fair value on a recurring basis are as follows at SeptemberJune 30, 20192020 and December 31, 2018:2019:
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
September 30, 2019: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
June 30, 2020: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Derivative liabilities |
| $ | 6,832,291 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,832,291 |
|
| $ | 6,716,702 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,716,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total liabilities measured at fair value |
| $ | 6,832,291 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,832,291 |
|
| $ | 6,716,702 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,716,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
December 31, 2018: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
December 31, 2019: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Derivative liabilities |
| $ | 10,363,105 |
|
| $ | - |
|
| $ | - |
|
| $ | 10,363,105 |
|
| $ | 6,160,895 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,160,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total liabilities measured at fair value |
| $ | 10,363,105 |
|
| $ | - |
|
| $ | - |
|
| $ | 10,363,105 |
|
| $ | 6,160,895 |
|
| $ | - |
|
| $ | - |
|
| $ | 6,160,895 |
|
During the ninesix months ended SeptemberJune 30, 2019,2020, the Company had the following activity in its derivative liabilities account:
|
| Convertible Notes Payable |
| Series B Preferred Stock |
| Stock Options |
| Total |
|
| Convertible Notes Payable |
|
| Series B Preferred Stock |
|
| Stock Options |
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Derivative liabilities at December 31, 2018 |
| $ | 7,809,054 |
| $ | 2,339,898 |
| $ | 214,153 |
| $ | 10,363,105 |
| |||||||||||||||||||
Derivative liabilities at December 31, 2019 |
| $ | 3,606,194 |
| $ | 2,535,359 |
| $ | 19,342 |
| $ | 6,160,895 |
| |||||||||||||||||||
Addition to liabilities for new debt/shares issued |
| 517,000 |
| - |
| - |
| 517,000 |
|
| 40,766 |
| - |
| - |
| 40,766 |
| ||||||||||||||
Elimination of liabilities for debt conversions |
| (143,692 | ) |
| - |
| - |
| (143,692 | ) |
| (76,692 | ) |
| (234,855 | ) |
| - |
| (311,547 | ) | |||||||||||
Change in fair value |
|
| (4,037,960 | ) |
|
| 236,373 |
|
|
| (102,535 | ) |
|
| (3,904,122 | ) |
|
| (283,487 | ) |
|
| 1,117,010 |
|
|
| (6,935 | ) |
|
| 826,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Derivative liabilities at September 30, 2019 |
| $ | 4,144,402 |
|
| $ | 2,576,271 |
|
| $ | 111,618 |
|
| $ | 6,832,291 |
| ||||||||||||||||
Derivative liabilities at June 30, 2020 |
| $ | 3,286,781 |
|
| $ | 3,417,514 |
|
| $ | 12,407 |
|
| $ | 6,716,702 |
|
Revenue Recognition
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition” (Topic 605). The Company had no operating revenues prior to the Merger. Effective December 1, 2018, the Company’s revenues, included in loss from discontinued operations, were derived primarily from the sale of monthly and annual tech support subscriptions and partnership fees, and from software applications that customers purchase via the Company’s online store. Sales were processed using a real-time payment processing company. Revenue from product sales is recorded net of processing costs.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
| · | identification of the contract, or contracts, with a customer; |
| · | identification of the performance obligations in the contract; |
| · | determination of the transaction price; |
| · | allocation of the transaction price to the performance obligations in the contract; and |
| · | recognition of revenue when, or as, we satisfy a performance obligation. |
11 |
Table of Contents |
Amounts collected from customers for support subscriptions and partnership fees with a contract life of one month or greater are recorded as deferred revenue and recognized over the life of the contract.
Subsequent to the agreement to sell EllisLab Corp. Sale Agreement, which closed on September 30, 2019, the Company does not have any sources of revenues.
Income (Loss) per Share
Basic net income or loss per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding. Diluted net income or loss per common share is computed by dividing net income or loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding. Potential dilutive common share equivalents consist of shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock, using the treasury stock method and the average market price per share during the period, and shares issuable upon exercise of convertible notes payable and convertible preferred stock.
Basic weighted average number common shares outstanding are reconciled to diluted weighted average number of common shares outstanding as follows:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Basic weighted average number of shares |
| 90,951,343 |
| 38,776,436 |
| 61,204,791 |
| 38,776,436 |
|
| 17,641,667 |
| 225,668 |
| 11,378,418 |
| 204,820 |
| ||||||||||||||
Dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Stock options |
| - |
| - |
| - |
| - |
|
| - |
| - |
| - |
| - |
| ||||||||||||||
Series B preferred stock |
| - |
| - |
| 734,318,182 |
| - |
|
| - |
| 2,564,286 |
| - |
| 2,564,286 |
| ||||||||||||||
Series C preferred stock |
| - |
| - |
| - |
| - |
|
| - |
| 3,200,000 |
| - |
| 3,200,000 |
| ||||||||||||||
Convertible notes payable |
|
| - |
|
|
| - |
|
|
| 2,904,608,484 |
|
|
| - |
|
|
| - |
|
|
| 9,342,176 |
|
|
| - |
|
|
| 9,342,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Diluted weighted average number of shares |
|
| 90,951,343 |
|
|
| 38,776,436 |
|
|
| 3,700,131,457 |
|
|
| 38,776,436 |
|
|
| 17,641,667 |
|
|
| 15,332,130 |
|
|
| 11,378,418 |
|
|
| 15,311,282 |
|
Operating Lease
On September 5, 2017, we entered into an operating sublease for office space. The base rent for the sublease is $1,000 per month for a period of one year and month-to-month thereafter.
On January 1, 2019, we adopted Financial Accounting Standards Board (“FASB”) ASC 842, “Leases.” ASC 842 requires recognition of assets and liabilities for the rights and obligations created by leases and new disclosures about leases. We adopted ASC 842 using the optional modified retrospective transition method. Under this transition method, we did not recast the prior period financial statements presented.
The adoption of ASC 842 resulted in the measurement and recognition of an operating lease liability and corresponding right-of use asset (included in other assets) in the amount of $18,352 as of January 1, 2019. The operating lease liability was measured as the present value of assumed remaining lease payments using an estimated incremental borrowing rate. We amortize the right-of-use asset over the term of the lease.
12 |
Table of Contents |
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements issued by the FASB during the ninesix months ended SeptemberJune 30, 20192020 and through the date of filing of this report that the Company believes will have a material impact on its financial statements.
Reclassifications
Certain amounts in the condensed financial statements for the three months and nine months ended September 30, 2018prior year periods have been reclassified to conform to the presentation for the three months and nine months ended September 30, 2019.current year periods.
NOTE 3 – MERGER AND SUBSEQUENT SALE
On November 30, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the EllisLab, Inc., Rick Ellis (“Ellis”), and EllisLab Corp., a newly formed Nevada corporation and wholly owned subsidiary of the Company, pursuant to which EllisLab, Inc. merged with and into EllisLab Corp. (the “Merger”). Pursuant to the terms of the Merger Agreement, Ellis received 36,000 shares of the Company’s newly designated Series C Convertible Preferred Stock, with a stated value of $100 per share, in exchange for the cancellation of all common shares of EllisLab, Inc. owned by Ellis, which shares represented 100% of the issued and outstanding capital stock of EllisLab, Inc. The separate legal existence of EllisLab, Inc. ceased, and EllisLab Corp. became the surviving company.
Pursuant to the Merger Agreement, Ellis agreed to a covenant not to compete for a period of 2 years following the effective date of the Merger (the “Non-Competition Period”). Ellis further agreed that during the Non-Competition Period, he will not directly or indirectly solicit or agree to service for his benefit or the benefit of any third-party, any of the Company’s, Digital Locations, or EllisLab Corp. customers.
Pursuant to the Merger Agreement, during the period beginning on the effective date and ending on the 24 month anniversary thereof, Ellis will not directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell, or otherwise transfer or dispose of, any portion of the Series C preferred shares, or any shares of the Company’s common stock underlying the preferred shares, beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934.
Each of the parties to the Merger Agreement made customary representations and warranties in the Merger Agreement.
On November 30, 2018, in connection with and pursuant to the Merger Agreement, the Company entered into a Nonstatutory Stock Option Agreement (the “Option Agreement”) with Derek Jones (“Jones”), whereby the Company issued to Jones an option to purchase 100,000,000 shares of the Common stock of the Company, at an exercise price of $0.005 (the “Option”), in exchange for his surrender of an option to purchase 10% of the shares of outstanding common stock of EllisLab, Inc. The Option vested but may not be exercised for 2 years from the date of the Merger. The option contains a blocker that prevents Jones from exercising the Option if such exercise would result in beneficial ownership of more than 4.99% of the outstanding shares of the Company’s stock, without at least 61 days of prior notice. Under the Option, Jones is also subject to the Rule 144 restrictions of an affiliate.
The acquisition of EllisLab, Inc. in the Merger washas been accounted for as a purchase, and the accounts of EllisLab Corp. arewere consolidated with those of the Company as of December 1, 2018. The Company engaged an independent valuation firm to estimate the value of the consideration paid by the Company in the Merger, consisting of the issuance of 36,000 shares of the Company’s $0.001 par value Series C Preferred Stock to Ellis, valued at $4,345,866, and 100,000,000 stock options to purchase common shares of the Company to Jones, valued at $599,998.
Based on the report of the independent valuation firm, the total value of the consideration paid of $4,945,864 was allocated as follows:
Cash |
| $ | 35,822 |
|
Accounts receivable |
|
| 22,235 |
|
Property and equipment, net |
|
| 4,271 |
|
Accounts payable |
|
| (74,680 | ) |
Accrued expenses |
|
| (14,176 | ) |
Deferred revenue |
|
| (27,037 | ) |
Loans payable |
|
| (60,000 | ) |
Net liabilities |
|
| (113,565 | ) |
Intangible assets: |
|
|
|
|
Intellectual property |
|
| 37,000 |
|
Customer base |
|
| 79,000 |
|
Tradename/marks |
|
| 8,000 |
|
Non-compete agreements |
|
| 1,000 |
|
Goodwill |
|
| 4,934,429 |
|
|
|
|
|
|
Total |
| $ | 4,945,864 |
|
At December 31, 2018, the Company reviewed the goodwill recorded in the Merger and determined that an impairment expense of $4,934,429 was required.
On September 30, 2019, the Company, entered into an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. (the “EllisLab Corp. Sale Agreement”) with Rick Ellis to sell to Rick Ellis all of the issued and outstanding shares of EllisLab Corp. for $10,000. In payment of$10,000 and the purchase price, Rick Ellis tendered and assigned to the Company 36,000 shares of the Company’s Series C preferred stockConvertible Preferred Stock owned by him, which represents all of the issued and outstanding shares of the Series C preferred stock. In connection withConvertible Preferred Stock. Pursuant to the Ellis Lab Corp. Sale Agreement, the Covenant Not to CompeteCompany effectively divested itself of the Ellis Lab business and discontinued it. Consequently, the Lockuprevenues and expenses for EllisLab Corp. are reported as “Loss from discontinued operations, net of Stock Consideration entered intoincome taxes” in connection with the Merger were terminated and the parties’ obligations thereunder released. Also, on September 30, 2019, the Company and Jones entered into an Option Cancellation Agreement pursuant to which the Option was cancelled.
The Company recognized a bad debt expense of $356,851 in itsour condensed statements of operations for the three months and ninesix months ended SeptemberJune 30, 2019 as a result of2019. When presented, the agreement to forgive the loans made by the Company to EllisLab Corp. for operating funds.
Assetsassets and liabilities have been retroactively reclassified as assets and liabilities fromof discontinued operations at December 31, 2018 consisted of the following:
ASSETS |
|
|
| |
|
|
|
| |
Current assets from discontinued operations: |
|
|
| |
Cash |
| $ | 37,182 |
|
Accounts receivable |
|
| 3,434 |
|
Prepaid expenses |
|
| 3,635 |
|
|
|
|
|
|
Total current assets from discontinued operations |
| $ | 44,251 |
|
|
|
|
|
|
Non-current assets from discontinued operations: |
|
|
|
|
Property and equipment, net |
| $ | 4,076 |
|
Intangible assets, net |
|
| 122,917 |
|
|
|
|
|
|
Total non-current assets from discontinued operations |
| $ | 126,993 |
|
LIABILITIES |
|
|
| |
|
|
|
| |
Current liabilities from discontinued operations: |
|
|
| |
Accounts payable |
| $ | 77,876 |
|
Accrued expenses |
|
| 16,941 |
|
Deferred revenue |
|
| 25,178 |
|
|
|
|
|
|
Total current assets from discontinued operations |
| $ | 120,535 |
|
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:following:
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, |
|
| December 31, |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Computer equipment |
| $ | 12,303 |
| $ | 12,303 |
|
| $ | 12,303 |
| $ | 12,303 |
| ||
Office furniture and equipment |
|
| 1,459 |
|
|
| 1,459 |
|
|
| 1,459 |
|
|
| 1,459 |
|
Total |
| 13,762 |
|
| 13,762 |
|
| 13,762 |
| 13,762 |
| |||||
Less accumulated depreciation |
|
| (13,005 | ) |
|
| (12,645 | ) |
|
| (13,491 | ) |
|
| (13,167 | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net |
| $ | 757 |
|
| $ | 1,117 |
|
| $ | 271 |
|
| $ | 595 |
|
Depreciation expense was $(1)$270 and $337$284 for the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively and $359$324 and $1,011$360 for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively.
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5. CONVERTIBLE NOTES PAYABLE
Convertible Promissory Note – Accounts Payable of $29,500 in Default
On March 14, 2013, we entered into an agreement to issue a 5% convertible promissory note in the principal amount of $29,500, which is convertible into shares of our common stock at a conversion price equal to the lesser of $1.50 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. The note, with a principal balance of $29,500 at SeptemberJune 30, 2020 and December 31, 2019, matured on March 14, 2015, and is currently in default.
Convertible Promissory Notes – Related Parties of $58,600
On December 31, 2012, we issued 5% convertible promissory notes to two employees in exchange for services rendered in the aggregate amount of $58,600. The notes are convertible into shares of our common stock at a conversion price equal to the lesser of $2.00 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. We recorded a total debt discount of $57,050 related to the conversion feature of the notes, which has been fully amortized to interest expense, along with a derivative liability at inception. One of the notes with a principal balance of $25,980 at SeptemberJune 30, 2019,2020, matured on December 31, 2014 and is currently in default. The maturity date of a second note with a principal balance of $32,620 at SeptemberJune 30, 20192020 has been extended to December 31, 2019.2020.
March 2016 Convertible Promissory Note – $1,000,000
On March 4, 2016, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $1,000,000 (the “March 2016 $1,000,000 CPN”). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.03; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date, with the note payable upon demand, but in no event later than 60 months from March 4, 2016.
On March 14, 2016, we received proceeds of $27,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $27,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense. During the ninesix months ended SeptemberJune 30, 2019,2020, we issued the lender a total of 5,925,85326,337 shares of our common stock in consideration for the conversion of principal of $11,935$4,000 and accrued interest of $3,838,$1,589, resulting in a principal balance of $7,735$1,445 at SeptemberJune 30, 2019.2020.
On March 17, 2016, we received proceeds of $33,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On April 11, 2016, we received proceeds of $90,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $90,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On May 20, 2016, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
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On June 22, 2016, we received proceeds of $50,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On July 6, 2016, we received proceeds of $87,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $87,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On August 8, 2016, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On September 13, 2016, we received proceeds of $55,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On October 17, 2016, we received proceeds of $55,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 8, 2016, we received proceeds of $55,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On December 6, 2016, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On January 10, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On February 13, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On March 9, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On April 12, 2017, we received proceeds of $95,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $95,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On May 8, 2017, we received proceeds of $60,000 pursuant to the March 2016 $1,000,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
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June 2017 Convertible Promissory Note – $500,000
On June 2, 2017, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “June"June 2017 $500,000 CPN”CPN"). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.03; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date, with the note payable upon demand, but in no event later than 60 months from June 2, 2017.
On June 2, 2017, we received proceeds of $60,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On July 10, 2017, we received proceeds of $80,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $80,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On August 11, 2017, we received proceeds of $80,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $80,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On September 12, 2017, we received proceeds of $85,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $85,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On October 13, 2017, we received proceeds of $80,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $80,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 8, 2017, we received proceeds of $75,000 pursuant to the June 2017 $500,000 CPN. We recorded a debt discount of $75,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
December 2017 Convertible Promissory Note – $500,000
On December 14, 2017, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “December"December 2017 $500,000 CPN”CPN"). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.03; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note initially matured, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date, with the note payable upon demand, but in no event later than 60 months from December 14, 2017.
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On December 14, 2017, we received proceeds of $60,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On January 11, 2018, we received proceeds of $70,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $70,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $2,110 and theThe debt discount has been fully amortized to interest expense.
On February 7, 2018, we received proceeds of $60,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $6,247 and theThe debt discount has been fully amortized to interest expense.
On March 8, 2018, we received proceeds of $55,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $55,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $10,096 and theThe debt discount has been fully amortized to interest expense.
On March 14, 2018, we received proceeds of $6,500 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $6,500 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $1,300 and theThe debt discount has been fully amortized to interest expense.
On April 9, 2018, we received proceeds of $77,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $77,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $20,885 and theThe debt discount has been fully amortized to interest expense.
On May 7, 2018, we received proceeds of $60,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $60,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $20,877 and theThe debt discount has been fully amortized to interest expense.
On June 7, 2018, we received proceeds of $52,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $52,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $22,500, and theThe debt discount has been fully amortized to interest expense.
On July 10, 2018, we received proceeds of $35,000 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $35,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $18,315, and theThe debt discount has been fully amortized to interest expense.
On August 16, 2018, we received proceeds of $24,500 pursuant to the December 2017 $500,000 CPN. We recorded a debt discount of $24,500 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $15,304, and theThe debt discount has been fully amortized to interest expense.
August 2018 Convertible Promissory Note – $500,000
On August 17, 2018, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “August"August 2018 $500,000 CPN"). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.01; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note matures, with respect to each advance, one year from the effective date of each advance. Subsequently, the lender extended the maturity date, with the note payable upon demand, but in no event later than 60 months from August 17, 2018.
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On August 17, 2018, we received proceeds of $10,500 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $10,500 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On September 13, 2018, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On October 8, 2018, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On October 26, 2018, we received proceeds of $12,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $12,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 5, 2018, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 28, 2018, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On November 30, 2018, we received proceeds of $10,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $10,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On December 24, 2018, we received proceeds of $50,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. The debt discount has been fully amortized to interest expense.
On January 17, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $1,164 and the debt discount has been fully amortized to interest expense.
On February 25, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $3,836 and the debt discount has been fully amortized to interest expense.
On March 22, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $5,601 and the debt discount has been fully amortized to interest expense.
On March 26, 2019, we received proceeds of $15,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $15,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $3,525 and the debt discount has been fully amortized to interest expense.
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On April 11, 2019, we received proceeds of $15,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $15,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $4,180 and the debt discount has been fully amortized to interest expense.
On April 19, 2019, we received proceeds of $65,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $65,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $19,536 and the debt discount has been fully amortized to interest expense.
On June 28, 2019, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $14,754 and the debt discount has been fully amortized to interest expense.
On July 29, 2019, we received proceeds of $40,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $40,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $19,891, resulting in a remaining debt discount of $3,169 as of June 30, 2020.
On September 27, 2019, we received proceeds of $33,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $16,410, resulting in a remaining debt discount of $8,025 as of June 30, 2020.
On October 8, 2019, we received proceeds of $25,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $12,432, resulting in a remaining debt discount of $6,831 as of June 30, 2020.
October 2019 Convertible Promissory Note – $500,000
On October 31, 2019, we entered into an agreement to issue a 10% convertible promissory note in the aggregate principal amount of up to $500,000 (the “October 2019 $500,000 CPN”). The lender may advance the Company consideration for the note in such amounts as the lender may choose in its sole discretion. The note is convertible into shares of our common stock at a price per share equal to the lesser of: $0.01; 50% of the lowest trade price of our common stock subsequent to the effective date of the note; or the lowest effective price per share granted to any person or entity (exclusive of our officers and directors) to acquire common stock subsequent to the effective date of the note. The note matures, with respect to each advance, one year from the effective date of each advance.
On August 17, 2018, we received proceeds of $10,500 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $10,500 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $6,588, and the debt discount has been fully amortized to interest expense.
On September 13, 2018, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $21,041, and the debt discount has been fully amortized to interest expense.
On October 8, 2018,31, 2019, we received proceeds of $25,000 pursuant to the August 2018October 2019 $500,000 CPN.
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On October 31, 2019, we received proceeds of $25,000 pursuant to the October 2019 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $18,699,$12,432, resulting in a remaining debt discount of $548$8,402 as of SeptemberJune 30, 2019.
On October 26, 2018, we received proceeds of $12,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $12,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $8,975, resulting in a remaining debt discount of $855 as of September 30, 2019.2020.
On November 5, 2018,12, 2019, we received proceeds of $25,000 pursuant to the August 2018October 2019 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $18,699,$12,432, resulting in a remaining debt discount of $2,465$9,221 as of SeptemberJune 30, 2019.
On November 28, 2018, we received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $30,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $19,863, resulting in a remaining debt discount of $7,425 as of September 30, 2019.
On November 30, 2018, we received proceeds of $10,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $10,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $7,480, resulting in a remaining debt discount of $1,671 as of September 30, 2019.2020.
On December 24, 2018, we received proceeds of $50,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $37,397, resulting in a remaining debt discount of $11,644 as of September 30, 2019.
On January 17,19, 2019, we received proceeds of $25,000 pursuant to the August 2018October 2019 $500,000 CPN. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $17,534,$12,432, resulting in a remaining debt discount of $7,466$11,749 as of SeptemberJune 30, 2019.2020.
On FebruaryJanuary 25, 2019 weConvertible Promissory Note – $38,000
Effective January 25, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $38,000, which matured on January 25, 2020. The Company received proceeds of $25,000 pursuant$35,000 after an original issue discount of $1,500 and payment of $1,500 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the August 2018 $500,000 CPN.note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $25,000$38,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $14,863, resulting in a remaining$1,415 and the debt discount has been fully amortized to interest expense. During the six months ended June 30, 2020, we issued the lender a total of $10,137 as12,855,132 shares of September 30, 2019.our common stock in consideration for the conversion of principal of $22,378, accrued interest of $3,800 and fees of $2,000, repaying the debt in full.
On March 22,May 23, 2019 we received proceeds of $25,000 pursuantConvertible Promissory Note – $33,000
Effective May 23, 2019, the Company entered into an agreement to the August 2018 $500,000 CPN. We recordedissue a debt discount of $25,000 related to the conversion feature of the10% convertible note along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expensean institutional investor in the principal amount of $13,115, resulting$33,000. The note matured on May 23, 2020 and was in a remaining debt discount of $11,885 as of Septemberdefault at June 30, 2019.
On March 26, 2019, we received proceeds of $15,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $15,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $7,705, resulting in a remaining debt discount of $7,295 as of September 30, 2019.
On April 11, 2019, we received proceeds of $15,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $15,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $7,049, resulting in a remaining debt discount of $7,951 as of September 30, 2019.
On April 19, 2019, we received proceeds of $65,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $65,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $29,126, resulting in a remaining debt discount of $35,874 as of September 30, 2019.
On June 28, 2019, we2020. The Company received proceeds of $30,000 pursuant to the August 2018 $500,000 CPN. We recorded a debtafter an original issue discount of $30,000 related$1,750 and payment of $1,250 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the conversion featurenote during the 180 days from the issuance of the note along with a derivative liability at inception. Duringredemption premiums ranging from 25% to 45%. After the nine months ended September 30, 2019, amortizationexpiration of debt discount was recorded to interest expense in180 days after issuance, the amountCompany has no right of $7,705, resulting in a remaining debt discount of $22,295 as of September 30, 2019.
On July 29, 2019, we received proceeds of $40,000 pursuant to the August 2018 $500,000 CPN. We recorded a debt discount of $40,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $5,164, resulting in a remaining debt discount of $34,836 as of September 30, 2019.
On September 27, 2019, we received proceeds of $33,000 pursuant to the August 2018 $500,000 CPN.prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $246,$12,984 and the debt discount has been fully amortized to interest expense. During the six months ended June 30, 2020, we issued the lender a total of 2,350,000 shares of our common stock in consideration for the conversion of principal of $3,804 and fees of $250, resulting in a remaining debt discountprincipal balance of $32,754 as of September$29,196 at June 30, 2019.2020.
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November 23, 2018May 24, 2019 Convertible Promissory Note – $33,000
Effective November 23, 2018,May 24, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000. The note matures November 23, 2019.matured on May 24, 2020. On January 16, 2020, the note was assigned to another institutional investor. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $29,564,$7,764 and the debt discount has been fully amortized to interest expense. During the ninesix months ended SeptemberJune 30, 2019,2020, we issued the lender a total of 10,690,1796,720,530 shares of our common stock in consideration for the conversion of principal of $33,000$19,600 and accrued interest of $1,650, extinguishingrepaying the notedebt in full.
December 5, 2018June 27, 2019 Convertible Promissory Note – $33,000
Effective December 5, 2018,June 27, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000. The note matures December 5, 2019.matured on June 27, 2020. On January 16, 2020, the note was assigned to another institutional investor. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $30,649,$16,139 and the debt discount has been fully amortized to interest expense. During the ninesix months ended SeptemberJune 30, 2019,2020, we issued the lender a total of 17,120,17016,207,380 shares of our common stock in consideration for the conversion of principal of $33,000 and accrued interest of $1,650, extinguishingrepaying the notedebt in full.
January 25, 2019 Convertible Promissory Note – $38,000
Effective January 25, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $38,000. The note matures January 25, 2020. The Company received proceeds of $35,000 after an original issue discount of $1,500 and payment of $1,500 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $38,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $27,832, resulting in a remaining debt discount of $10,138 as of September 30, 2019. During the nine months ended September 30, 2019, we issued the lender a total of 3,800,000 shares of our common stock in consideration for the conversion of principal of $4,386 and fees of $250, resulting in a principal balance of $33,614 as of September 30, 2019.
FebruaryAugust 13, 2019 Convertible Promissory Note – $38,000$33,000
Effective FebruaryAugust 13, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $38,000. The note matures February 13, 2020. The Company received proceeds of $35,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $38,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $38,000, and the debt discount has been fully amortized to interest expense. During the nine months ended September 30, 2019, we issued the lender a total of 27,071,429 shares of our common stock in consideration for the conversion of principal of $38,000 and accrued interest of $1,900, extinguishing the note in full.
March 25, 2019 Convertible Promissory Note – $35,000
Effective March 25, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $35,000. The note matures March 25, 2020. The Company received proceeds of $32,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $35,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $20,589, resulting in a remaining debt discount of $14,411 as of September 30, 2019. During the nine months ended September 30, 2019, we issued the lender a total of 4,000,000 shares of our common stock in consideration for the conversion of principal of $5,200, resulting in a principal balance of $29,800 as of September 30, 2019.
May 23, 2019 Convertible Promissory Note – $33,000
Effective May 23, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000. The note matures May 23,on August 13, 2020. The Company received proceeds of $30,000 after an original issue discount of $1,750 and payment of $1,250 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on,On January 16, 2020, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days priorwas assigned to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $11,721, resulting in a remaining debt discount of $21,279 as of September 30, 2019.
May 24, 2019 Convertible Promissory Note – $33,000
Effective May 24, 2019, the Company entered into an agreement to issue a 10% convertible note with ananother institutional investor in the principal amount of $33,000. The note matures May 24, 2020.investor. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019, amortization2020, we issued the lender a total of debt discount was recorded to interest expense2,047,619 shares of our common stock in consideration for the amountconversion of $11,631,principal of $4,300, resulting in a remaining debt discountprincipal balance of $21,369 as of September$28,700 at June 30, 2019.2020.
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June 27, 2019 Convertible Promissory Note – $33,000
Effective June 27, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000. The note matures June 27, 2020. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $4,328, resulting in a remaining debt discount of $28,672 as of September 30, 2019.
August 13, 2019 Convertible Promissory Note – $33,000
Effective August 13, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $33,000. The note matures August 13, 2020. The Company received proceeds of $30,000 after payment of $3,000 of the fees and expenses of the lender and its counsel. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 20% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $33,000 related to the conversion feature of the note, along with a derivative liability at inception. During the nine months ended September 30, 2019, amortization of debt discount was recorded to interest expense in the amount of $8,566, resulting in a remaining debt discount of $24,434 as of September 30, 2019.
August 29, 2019 Convertible Promissory Note – $33,000$25,000
Effective August 29, 2019, the Company entered into an agreement to issue a 10% convertible note with an institutional investor in the principal amount of $25,000. The note matures on August 29, 2020. The Company received proceeds of $22,000 after an original issue discount of $1,500 and payment of $1,500 in legal fees. The lender, at its option, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 39% discount from the lowest trading price during the 15 days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at redemption premiums ranging from 25% to 45%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $25,000 related to the conversion feature of the note, along with a derivative liability at inception. During the ninesix months ended SeptemberJune 30, 2019,2020, amortization of debt discount was recorded to interest expense in the amount of $2,885,$16,410, resulting in a remaining debt discount of $22,115$2,590 as of SeptemberJune 30, 2019.2020. The note had a principal balance of $25,000 as of June 30, 2020.
March 16, 2020 Convertible Promissory Note – $38,000
Effective March 16, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $38,000. The note matures March 16, 2021. The Company received net proceeds of $35,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $18,766 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $5,450, resulting in a remaining debt discount of $13,316 as of June 30, 2020. The note had a principal balance of $38,000 as of June 30, 2020.
June 22, 2020 Convertible Promissory Note – $28,000
Effective June 22, 2020, the Company entered into a 12% convertible note with an institutional investor in the principal amount of $28,000. The note matures June 22, 2021. The Company received net proceeds of $25,000 after payment of $3,000 in legal fees and fees to the lender. The lender, at its option after 180 days from the issuance of the note, may convert the unpaid principal balance of, and accrued interest on, the note into shares of the Company’s common stock at a 45% discount from the lowest trading price during the 20 trading days prior to conversion. The Company may prepay the note during the 180 days from the issuance of the note at a redemption premium of 150%. After the expiration of 180 days after issuance, the Company has no right of prepayment. We recorded a debt discount of $28,000 related to the conversion feature of the note, along with a derivative liability at inception. During the six months ended June 30, 2020, amortization of debt discount was recorded to interest expense in the amount of $614, resulting in a remaining debt discount of $27,386 as of June 30, 2020. The note had a principal balance of $28,000 as of June 30, 2020.
Total accrued interest payable on notes payable was $516,318$704,229 and $342,752$581,610 as of SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively.
6. PPP LOAN PAYABLE
A loan to the Company in the principal amount of $9,501 was approved under the terms and conditions of the Paycheck Protection Program of the United States Small Business Administration (“SBA”) and the CARES Act (2020) (H.R. 748) (15 U.S.C. 636 et seq.) ( the “Act” ) and was funded in May 2020. The loan may be forgiven pursuant to the provisions of the Act.
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7. CAPITAL STOCK
At SeptemberJune 30, 2019,2020, the Company’s authorized stock consisted of 2,000,000,000 shares of common stock, with a par value of $0.001 per share. The Company is also authorized to issue 20,000,000 shares of preferred stock, with a par value of $0.001 per share. The rights, preferences and privileges of the holders of the preferred stock will be determined by the Board of Directors prior to issuance of such shares.
Series B Preferred Stock
On March 2, 2016, the Company filed a Certificate of Designation for its Series B Preferred Stock (the “Series B Certificate”) with the Secretary of State of Nevada designating 30,000 shares of its authorized preferred stock as Series B Preferred Stock. The shares of Series B Preferred Stock have a par value of $0.001 per share.
The total face value of this entire series is three million dollars ($3,000,000). Each share of Series B Preferred Stock has a stated face value of One Hundred Dollars ($100) (“Share Value”) and is convertible into shares of fully paid and non-assessable shares of common stock of the Company.
As of September 30, 2019,March 31, 2020 and December 31, 2018,2019, the Company had 15,055 and 16,155 shares of Series B Preferred Stock outstanding, respectively, with a face value of $1,615,500.$1,505,500 and $1,615,500, respectively. These shares were issued in March 2016 for the redemption and cancellation of $1,615,362 of convertible promissory notes and $264,530 of accrued interest payable. Effective February 26, 2020, William Beifuss, Jr., the Company’s President, converted 1,100 shares of Series B preferred stock into 9,777,778 shares of the Company’s common stock. Mr. Beifuss previously acquired the Series B shares from a lender in a private transaction.
The holders of outstanding shares of the Series B Preferred Stock (the “Series"Series B Holders”Holders") are entitled to receive dividends pari passu with the holders of Common Stock, except upon a liquidation, dissolution and winding up of the Company, in which case the Series B Preferred Stock has a preference. Such dividends will be paid equally to all outstanding shares of Series B Preferred Stock and Common Stock, on an as-if-converted basis with respect to the Series B Preferred Stock. The Series B Holders may elect to use the most favorable conversion price for the purpose of determining the as-if-converted number of shares.
In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Series B Holder shall be entitled to receive, out of the assets of the Company available for distribution to its shareholders upon such liquidation, whether such assets are capital or surplus of any nature, an amount equal to one hundred dollars ($100) for each such share of the Series B Preferred Stock (as adjusted for any combinations, consolidations, stock distributions, stock splits or stock dividends with respect to such shares), plus all dividends, if any, declared and unpaid thereon as of the date of such distribution, before any payment is made or any assets distributed to the holders of the Common Stock. After such payment, the remaining assets of the Company will be distributed to the holders of Common Stock.
If the assets to be distributed to the Series B Holders are insufficient to permit the receipt by such Holders of the full preferential amounts, then all of such assets will be distributed among such Holders ratably in accordance with the number of such shares then held by each such Holder.
The sale of all or substantially all of the Company’sCompany's assets, any consolidation or merger of the Company with or into any other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the Company’sCompany's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’sCompany's voting power is transferred, excluding any consolidation or merger effected exclusively to change the domicile of the Company, is deemed to be a liquidation, dissolution or winding up.
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The Series B Preferred Stock is convertible into Common Stock.
The Series B Holder has the right, at any time, at its election, to convert all or part of the Share Value into shares of Common Stock. The conversion price is the lesser of (1) Fifty Percent (50%) of the lowest trade price of Common Stock recorded on any trade day after December 12, 2012 or (2) the lowest effective price per share granted to any person or entity, including the Series B Holder but excluding officers and directors of the Company, to acquire Common Stock, or adjusted, whether by operation of purchase price adjustment, settlement agreements, exchange agreements, reset provision, floating conversion or otherwise, any outstanding warrant, option or other right to acquire Common Stock or outstanding Common Stock equivalents (the “Conversion Price”"Conversion Price").
The conversion formula is as follows: The number of shares receivable upon conversion equals the Share Value divided by the Conversion Price. A conversion notice (the “Conversion Notice”"Conversion Notice") may be delivered to Company by any method of the Series B Holder’sHolder's choice (including but not limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions will be cashless and not require further payment from the Holder. If no objection is delivered from the Company to the Series B Holder, with respect to any variable or calculation reflected in the Conversion Notice, within 24 hours of delivery of the Conversion Notice, the Company will thereafter be deemed to have irrevocably confirmed and ratified such notice of conversion and waived any objection. The Company will deliver the shares of Common Stock from any conversion to the Series B Holder (in any name directed by the Series B Holder) within three (3) business days of Conversion Notice delivery. If the Company is participating in the Depository Trust Company (“DTC”("DTC") Fast Automated Securities Transfer (“FAST”("FAST") program, then upon request of the Holder and provided that the shares to be issued are eligible for transfer under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act"), or are effectively registered under the Securities Act, the Company will cause its transfer agent to electronically issue the Common Stock issuable upon conversion to the Holder through the DTC Direct Registration System (“DRS”("DRS"). If the Company is not participating in the DTC FAST program, then the Company agrees in good faith to apply and cause the approval for participation in the DTC FAST program.
The Conversion Price is subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’sCompany's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. No fractional shares of the Common Stock shall be issuable upon the conversion of shares of the Series B Preferred Stock and the Company shall pay the cash equivalent of any fractional share upon such conversion.
If the Company fails to deliver shares in accordance with the required time frame, then for each conversion, a penalty of $1,500 per day will be assessed for each day after the third business day (inclusive of the day of the conversion) until share delivery is made. Such penalty may be converted into Common Stock at the Conversion Price or payable in cash, at the sole option of the Series B Holder (under the Holder’sHolder's and the Company’sCompany's expectations that any penalty amounts shall tack back to the original date of the issuance of Series B Preferred Stock, consistent with applicable securities laws).
In no event will the Series B Holder be entitled to convert any Series B Preferred Stock, such that upon conversion the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Series B Preferred Stock or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to these limitations), and (2) the number of shares of Common Stock issuable upon the conversion of Series B Preferred Stock, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. The limitations on conversion may be waived by the Holder upon, at the election of the Series B Holder, not less than 61 days prior notice to the Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Series B Holder, as may be specified in such notice of waiver).
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Except as required by law, the Series B Holders are not entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting). Each Holder of outstanding shares of Series B Preferred Stock will be entitled, on the same basis as holders of Common Stock, to receive notice of such action or meeting.
So long as any shares of the Series B Preferred Stock remain outstanding, the Company will not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock voting together as one class: (a) alter or change the rights, preferences or privileges of the shares of the Series B Preferred Stock so as to affect materially and adversely such shares; or (b) create any new class of shares having preference over the Series B Preferred Stock.
The Series B Holder has the right, at its sole discretion, to elect a fixed conversion price for the Series B Preferred Stock. The Fixed Conversion Price may not be lower than the Conversion Price. The Company will not, by amendment of its Certificate of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series B Certificate, and will at all times carry out all the provisions of the Series B Certificate.
Series C Preferred Stock
In November 2018, the Company filed a Certificate of Designation for its Series C Preferred Stock (the “Series C Certificate”) with the Secretary of State of Nevada designating 36,000 shares of its authorized preferred stock as Series C Preferred Stock. The shares of Series C Preferred Stock have a par value of $0.001 per share. The total face value of this entire series is three million six hundred thousand dollars ($3,600,000). Each share of Series C Preferred Stock has a stated face value of One Hundred Dollars ($100) (“Share Value”) and is convertible into shares of fully paid and non-assessable shares of common stock of the Company.
As discussed in Note 3, the Company issued 36,000 shares of Series C Preferred Stock to the owner of the common stock of EllisLab, Inc. in the Merger, which shares were surrendered and cancelled on September 30, 2019 pursuant to the sale of EllisLab Corp.
The holders of outstanding shares of the Series C Preferred Stock (the “Series C Holders”) shall be entitled to receive dividends pari passu (on a pro rata basis) with the holders of Series B Preferred Stock and Common Stock, except upon a liquidation, dissolution and winding up of the Company. Such dividends shall be paid equally to all outstanding shares of Series C Preferred Stock, Series B Preferred Stock and Common Stock,common stock, on an as-if-converted basis with respect to the Series C Preferred Stock and Series B Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Holder of each outstanding share of the Series C Preferred Stock shall be entitled to receive, on a pro rata basis with the outstanding Series B Preferred Stock, out of the assets of the Company available for distribution to its shareholders upon such liquidation, whether such assets are capital or surplus of any nature, an amount equal to one hundred dollars ($100.00) for each such share of the Series C Preferred Stock (as adjusted for any combinations. consolidations, stock distributions, stock splits or stock dividends with respect to such shares), plus all dividends, if any, declared and unpaid thereon as of the date of such distribution, before any payment shall be made or any assets distributed to the holders of the Common Stock,common stock, and, after such payment, the remaining assets of the Company shall be distributed to the holders of Common Stock.common stock.
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Each share of Series C Preferred Stock is convertible into twenty thousand (20,000) shares of the Company’s fully paid and nonassessable shares of Common Stock,common stock, as adjusted. The Series C Preferred Stock have the respective rights, privileges and designations as are set forth in the Certificate of Designations, Preferences, Rights and Limitations of Series C Preferred Stock appended hereto as Exhibit 4.1. The Series C Preferred Stock contains a blocker that prevents the Holder from converting the Series C Preferred Stock if such exercise would result in beneficial ownership of more than 4.99% of the outstanding shares of the Company’s stock, without at least 61 days of prior notice. Under the Series C Preferred Stock, the Holder is also subject to the Rule 144 restrictions of an affiliate.
Except as required by law or as specifically provided in the Certificate of Designation, the Series C Holders shall not be entitled to vote, as a separate class or otherwise, on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting); provided, however, that each Series C Holder shall be entitled, on the same basis as holders of Common Stock, to receive notice of such action or meeting.
CommonSeries D Preferred Stock
On April 20, 2016,November 27, 2019, the Company amendedfiled a Certificate of Designation for its articlesSeries D Preferred Stock (the “Series D Certificate”) with the Secretary of incorporation to reduce the numberState of authorizedNevada which designates 1,000 shares of commonthe Company’s preferred stock from 1,000,000,000par value $0.001 per share as Series D Preferred Stock. William E. Beifuss, Jr., the Company’s President and Chief Executive Officer, was issued 1,000 shares of Series D Preferred Stock valued at $15,000 by an independent valuation firm, which shares were outstanding as of December 31, 2019. The 1,000 shares of Series D preferred stock were automatically redeemed on January 11, 2020, 45 days after the effective date of the Series D Certificate.
Pursuant to 100,000,000the terms of the Designation, holders of Series D Preferred Stock shall not be entitled to dividends or a liquidation preference and shall have no conversion rights. For so long as any shares of the Series D Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, shall have the right to affectvote in an amount equal to fifty-one percent (51%) of the total voting power of the Company’s shareholders. Such vote shall be determined by the holder(s) of a one-for-ten reverse stock splitmajority of its authorized,the then issued and outstanding shares of Series D Preferred Stock.
The shares of the Series D Preferred Stock shall be automatically, and without any required action by the Company or the holders thereof, redeemed by the Company at their par value on the first to occur of the following triggering events: (i) a date forty-five (45) days as after the Effective Date, (ii) on the date that Mr. Beifuss. ceases, for any reason, to serve as officer, director or consultant of the Company, it being understood that if Mr. Beifuss continues without interruption to serve thereafter in one or more capacities as officer, director or consultant of the Company this shall not be considered a cessation of service, or (iii) on the date that the Company’s shares of common stock.stock first trade on any national securities exchange and such listing is conditioned upon the elimination of the preferential voting rights of the Series D Preferred Stock set forth in the Certificate of Designation.
Common Stock
Effective February 14, 2020, the Company effected a reverse split of its common stock at a ratio of one for two hundred twenty-five shares (1:225) with the filing of a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada. The Company has given retroactive affecteffect for the reverse stock split in its financial statements and notes thereto for all periods presented in the accompanying financial statements.presented.
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As of SeptemberJune 30, 2019,2020 and December 31, 2018,2019, the Company had 115,692,99651,507,228 and 40,750,0401,049,380 shares of common stock issued and outstanding, respectively.
During the ninesix months ended SeptemberJune 30, 2019,2020, the Company issued a total of 74,942,95650,457,848 shares of common stock at fair value in considerationstock: 40,677,465 shares for the conversion of $125,521$87,081 of principal of convertible promissory notes payable, accrued interest payable of $9,038$8,689, and fees of $250.$2,250; 9,777,778 shares for the conversion of 1,100 shares of Series B preferred stock recorded at par value; and 2,605 shares for the rounding of shares in the February 2020 reverse stock split recorded at par value of $3. In connection with the convertible debt and Series B preferred stock conversions, the Company reduced derivative liabilities by $143,692.$311,547. There was no gain or loss on settlement of debt due to the conversions occurring within the terms of the convertible note.underlying agreements
During the ninesix months ended SeptemberJune 30, 2018,2019, the Company did not issue anyissued 145,365 shares of common stock.stock at fair value in consideration for the conversion of $72,710 of principal of convertible promissory notes and accrued interest payable of $3,729. In connection with the convertible debt conversions, the Company reduced derivative liabilities by $82,632. There was no gain or loss on settlement of debt due to the conversion occurring within the terms of the convertible note.
7.8. STOCK OPTIONS AND WARRANTS
As of SeptemberJune 30, 2019,2020, the Board of Directors of the Company had granted non-qualified stock options and warrants exercisable that were outstanding for a total of 41,400,000184,001 shares of common stock to its employees, officers, and consultants.
As further discussed in Note 3, on November 30, 2018 in connection with the Merger, the Company issued a ten-year option to purchase 100,000,000 shares of common stock of the Company, at an exercise price of $0.005. The option vested upon grant but may not be exercised for 2 years from the date of the Merger. Stock-based compensation of $599,998, measured at the grant date using a multinomial lattice model, was included in the purchase price recorded in the Merger and recorded to additional paid-in capital. This option was surrendered upon the sale of EllisLab Corp. on September 30, 2019.
On November 30, 2018, the Company also issued ten-year warrants to two consultants to purchase a total of 40,000,000 shares of common stock of the Company, at an exercise price of $0.005. The warrants vested upon grant but may not be exercised for 2 years from the date of issuance. Stock-based compensation of $188,127, measured at the grant date using a multinomial lattice model, was included in general and administrative expenses and recorded to derivative liabilities due to the existence of a tainted equity environment.
We recognized no stock-based compensation expense for the three months and ninesix months ended SeptemberJune 30, 20192020 and 2018.
As of SeptemberJune 30, 2019,2020, we had no unrecognized stock-based compensation expense.
A summary of the Company’s stock options and warrants as of SeptemberJune 30, 2019,2020, and changes during the ninesix months then ended is as follows:
|
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contract Term (Years) |
|
| Aggregate Intrinsic Value |
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| Weighted |
|
| Weighted Average |
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| Aggregate |
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Outstanding at December 31, 2018 |
| 141,406,250 |
| $ | 0.006 |
| 9.84 |
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Outstanding at December 31, 2019 |
| 184,001 |
| $ | 1.544 |
| 8.65 |
|
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Granted |
| - |
| $ | - |
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|
|
| - |
| $ | - |
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| ||||||||||||
Exercised |
| - |
| $ | - |
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|
|
|
|
| - |
| $ | - |
|
|
|
|
| ||||||||||||
Forfeited or expired |
|
| (100,006,250 | ) |
| $ | 0.01 |
|
|
|
|
|
|
| - |
|
| $ | - |
|
|
|
|
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Outstanding at September 30, 2019 |
|
| 41,400,000 |
|
| $ | 0.007 |
|
| 8.90 |
| $ | - |
| ||||||||||||||||||
Outstanding at June 30, 2020 |
|
| 184,001 |
|
| $ | 1.544 |
| 8.15 |
| $ | - |
|
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing price of our common stock of $0.0022$0.0550 as of SeptemberJune 30, 2019,2020, which would have been received by the holders of in-the-money options and warrants had the holders exercised their options and warrants as of that date.
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Table of Contents |
8.
9. DERIVATIVE LIABILITIES
The fair value of the Company’s derivative liabilities is estimated at the issuance date and is revalued at each subsequent reporting date. We estimate the fair value of derivative liabilities associated with our convertible notes payable, Series B preferred stock and warrants using a multinomial lattice model based on projections of various potential future outcomes. Where the number of warrants or common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional warrants and convertible debt and equity are included in the value of the derivatives.
The significant assumptions used in the valuation of the derivative liabilities at SeptemberJune 30, 20192020 are as follows:
Conversion to stock |
| Monthly |
| |
Stock price on the valuation date |
| $ | 0.0022 |
|
Conversion price |
| $ | 1.60 - $0.00095 |
|
Risk free interest rates |
| 1.49% - 2.74 | % | |
Years to maturity |
|
| 15.0 |
|
Expected volatility |
| 185%–363 | % |
Conversion to stock | Monthly |
The value of our derivative liabilities was estimated as follows at:
The calculation input assumptions are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liability will fluctuate from period to period, and the fluctuation may be material.
Pursuant to a written consulting agreement, dated May 31, 2013 and amended effective November 1, 2016, William E. Beifuss, Jr., our current President, Chief Executive Officer and Acting Chief Financial Officer, is to receive fees for services of $10,000 per month. Fees payable to Mr. Beifuss of $70,000 and $10,000 are included in accounts payable as of June 30, 2020 and December 31, 2019, respectively. As discussed in Note 7, the Company issued 36,000 shares of Series C Preferred Stock to Rick Ellis, the former Chief Executive Officer of the Company and Chief Executive Officer of EllisLab Corp., in the EllisLab Corp. Merger, which shares were surrendered and cancelled on September 30, 2019 pursuant to the EllisLab Corp. Sale Agreement. As discussed in Note 7, in November 2019, the Company issued to Mr. Beifuss 1,000 shares of Series D Preferred Stock for services valued at $15,000 by an independent valuation firm. The shares were automatically redeemed in January 2020, 120 days after the effective date of the related Series D Preferred Stock Certificate.
As discussed in Note 7, effective February 26, 2020, Mr. Beifuss converted 1,100 shares of Series B preferred stock into 9,777,778 shares of the Company’s common stock. Mr. Beifuss previously acquired the Series B shares from a lender in a private transaction. The transaction was recorded at the par value of the common stock. See Note 5 for discussion of convertible notes payable with related parties. 11. COMMITMENTS AND CONTINGENCIES Operating Lease
On September 5, 2017, we entered into an operating sublease for office space. The base rent for the sublease is $1,000 per month for a period of one year and month-to-month thereafter. Management has assumed a three-year life for the sublease arrangement. On January 1, 2019, we adopted ASC 842, “Leases,” which resulted in the recognition of an operating lease liability and corresponding right-of use asset (“ROU”)
As of
For the
The table below reconciles the Company’s future cash obligations for the operating lease liability recorded on the consolidated balance sheet as
Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:
Effective July 8, 2020, the
Convertible Note Conversions
Subsequent to
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below, and elsewhere in this report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements contained herein after the date of this report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in our annual report on Form 10-K for the year ended December 31,
You should read the following description of our financial condition and results of operations in conjunction with the condensed financial statements and accompanying notes included in this report.
Current Overview
On November 30, 2018, the Company entered into an Agreement and Plan of Merger
On September 30, 2019, the Company, entered into an Agreement for the Purchase and Sale of Capital Stock of EllisLab Corp. (the “EllisLab Corp. Sale Agreement”) with Rick Ellis to sell to Rick Ellis all of the issued and outstanding shares of EllisLab Corp. for
Consequently, the revenues and expenses for EllisLab Corp. are reported as “Loss from discontinued operations, net of income taxes” in our condensed statements of operations for
We are an early stage developer and acquirer of cell tower sites for 5G services. We intend to develop a portfolio of cell tower sites to help meet the
The accompanying financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. As of
The ability of the Company to continue as a going concern is dependent upon, among other things, raising additional capital. The Company has obtained operating funds primarily from the issuance of convertible debt. Management believes this funding will continue and will provide the additional cash needed to meet the Company’s obligations as they become due. There can be no assurance, however, that the Company will be successful in accomplishing its objectives. Without such additional capital we may be required to cease operations. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
Results of Operations
Three Months and
Revenues
As discussed above, revenues and expenses of EllisLab Corp. are combined and presented as loss from discontinued operations, net of income taxes in our condensed statements of operations. Therefore, we reported no revenues for
General and Administrative Expenses
General and administrative expenses decreased to
Depreciation and Amortization Expense
Our investment in property and equipment currently is not material to our operations. Depreciation expense was
Other Income (Expense)
Total other Total other expense was $1,174,233 for the six months ended June 30, 2020 compared to total other income of $3,122,572 for the six months ended June 30, 2019. The total other income for the first quarter of the last fiscal year resulted from a gain on change in derivative liabilities, partially offset by interest expense.
We reported a loss on change in derivative liabilities of $736,625 in the three months ended June 30, 2020 compared to a gain on change in derivative liabilities of
Our interest expense
Net Income
As a result of the
Liquidity and Capital Resources
As of
We have funded our operations During the six months ended June 30, 2020, we used net cash of $62,668 in
During the
During the
Net cash provided by financing activities during the
Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences, or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we may have to curtail our marketing and development plans and possibly cease our operations.
Our prospects must be considered considering the risks, expenses, and difficulties frequently encountered by companies in their early stage of operations. To address these risks, we must, among other things, seek growth opportunities through investment and acquisitions, implement and successfully execute our business strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. We cannot assure that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition and results of operations. Future Impact of Covid-19 The future impact of the Covid-19 pandemic on companies is evolving and we are currently unable to assess with certainty the broad effects of Covid-19 on our business. As of June 30, 2020, the Company had no material assets that would be subject to impairment or change in valuation due to Covid-19. However as of June 30, 2020, the reported values of the Company’s material convertible debt and derivative liabilities are based on multiple factors, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. We believe these inputs will be subject to even more significant changes due to the impact on capital markets of Covid-19, and the future estimated fair value of these liabilities may fluctuate materially from period to period. Without a current source of revenue, we are currently dependent on debt or equity financing to fund our operations and execute our business plan. We believe that the impact on capital markets of Covid-19 may make it more costly and more difficult for us to access these sources of funding.
Critical Accounting Policies
Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements. The following is a summary of those accounting policies that involve significant estimates and judgment of management.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment and intangible assets, impairment of assets, the deferred tax valuation allowance, the fair value of stock options and derivative liabilities. Actual results could differ from those estimates.
Derivative Liabilities
We have identified the conversion features of our convertible notes payable and Series B preferred stock and certain stock options and warrants as derivatives. Where the number of common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional options, warrants and convertible debt and equity are included in the value of the derivatives. We estimate the fair value of the derivatives using the Black-Scholes pricing model and a multinomial lattice model based on projections of various potential future outcomes. We estimate the fair value of the derivative liabilities at the inception of the financial instruments, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, additional paid-in capital and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board (“FASB”)
We measure certain financial instruments at fair value on a recurring basis. Liabilities measured at fair value on a recurring basis are as follows at June 30, 2020 and
Revenue Recognition
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition” (Topic 605). The Company had no operating revenues prior to the Merger. Effective December 1, 2018, the Company’s revenues,
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
Amounts collected from customers for support subscriptions and partnership fees with a contract life of one month or greater are recorded as deferred revenue and recognized over the life of the contract.
Subsequent to the agreement to sell EllisLab Corp. on September 30, 2019, the Company does not have any sources of revenues.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the value of the award granted using either the Black-Scholes option pricing model or a multinomial lattice model based on projections of various potential future outcomes and recognized over the period in which the award vests. For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination. The stock-based compensation expense is included in general and administrative expenses.
Recently Issued Accounting Pronouncements
Although there are several new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management’s Report on Internal Control over Financial Reporting We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation of our Chief Executive Officer and Acting Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2020 based on the A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following
Because of these material weaknesses, management has concluded that the
Changes in Internal Controls During the three months ended
We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
The future impact of the Covid-19 pandemic on companies is evolving and we are currently unable to assess with certainty the broad effects of Covid-19 on our business. As of June 30, 2020, the Company had no material assets that would be subject to impairment or change in valuation due to Covid-19. However, as of June 30, 2020, the reported values of the Company’s material convertible debt and derivative liabilities are based on multiple factors, including the market price of our stock, interest rates, our stock price volatility, variable conversion prices based on market prices as defined in the respective agreements and probabilities of certain outcomes based on management projections. We believe these inputs will be subject to even more significant changes due to the impact on capital markets of Covid-19, and the future estimated fair value of these liabilities may fluctuate materially from period to period. Without a current source of revenue, we are currently dependent on debt or equity financing to fund our operations and execute our business plan. We believe that the
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
None.
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EX-101.INS | XBRL INSTANCE DOCUMENT | |
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EX-101.SCH | XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | |
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EX-101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE | |
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EX-101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | |
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EX-101.LAB | XBRL TAXONOMY EXTENSION LABELS LINKBASE | |
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EX-101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
__________
*Filed herewith
41 |
Table of Contents |
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Barbara, State of California, on November 14, 2019.August 13, 2020.
| DIGITAL LOCATIONS, INC. | ||
| By: | /s/ William E. Beifuss, Jr. | |
| Chief Executive Officer
(Principal |
42 |